The Janus Henderson Upside Maximization Protocol Indices (JUMP) seek to minimize exposure to downside volatility while maximizing exposure to upside risk when utilized in connection with principal protected products.
The JUMP proprietary methodology follows a three-step process:
- First, stock selection for downside mitigation. Quarterly, out of a 500-stock universe, JUMP selects 100 large cap stocks with the lowest downside volatility over the prior year and then weights them inversely to their downside volatility. This means those stocks that have exhibited the least downside risk, will have the highest weight.
- Second, a Volatility Control Mechanism for stabilizing returns. On a daily basis, JUMP applies a Volatility Control Mechanism to target a 15% annual volatility. This Volatility Control Mechanism increases overall exposure to equities when markets are calm, and reduces exposure when markets are exhibiting greater risk.
- Third, JUMP applies a Participation Enhancement Process. This monthly process is called the JUMP Barrier, and it ignores positive returns of below the 2% barrier, while crediting the full value of returns which are above the JUMP Barrier. By only crediting larger monthly returns, and ignoring smaller returns, the index creates a profile that seeks to maximize the exposure to large market events. The JUMP Barrier is applied to the index using daily dollar cost averaging with the aim to create smoother index returns.